Cobine Carmelson » Employers’ Liability Insurance

You don’t want insurance companies to pay fraudsters – especially if they’re using your premium

Jason Cobine, Insurance Expert — Mon, 15 Feb 2010 09:00:41 +0000

Have you contributed to Madoff’s legal defence costs?

Not all insurance disputes should be won by the insured, especially if they are fraudulent.

Usually I’m furious when I hear that an insurance claim has been declined. This time I was pleased; Lloyd’s of London successfully defended themselves in a US court when Madoff tried to appeal that Lloyd’s were wrong to cut off the funding of his defence costs.

Lloyd’s had already parted with $4million whilst the legal eagles prepared their cases. They pulled the plug after one of his cohorts pleaded guilty to fraud of one sort or another. Evidence of illegal acts is one of the triggers for insurance problems. Once an allegation is made underwriters will refuse to continue paying defence costs or any damages awarded. Until then, the policy wording (a legally binding contract) meant that they were obliged to pay for defence costs for Madoff, other Directors, Officers and decision makers of the company that purchased the cover.

This may seem odd yet the wording of the contract states that there has to be evidence of fraud, or another type of breach, before insurers can turn off the claims tap. In this case, the reason for the admission of guilt could be anything from a guilty conscience, a shorter sentence, a smaller fine or some form of persuasion that you and I won’t know about – having not been accused of infringing the law or fleecing thousands of innocent investors.

The defence costs are covered if one of the “controlling minds” of a company (or charity) is accused of a “wrongful act” in their duty as a director (or trustee). Breach of fiduciary duties is considered a wrongful act yet it is not covered if illegal or deliberate.

There are loads of other examples of what are considered wrongful acts and surprisingly few exclusions on these policies. That’s because they’re a relatively new form of cover. Over time, as claims that shouldn’t be paid are, underwriters will start to exclude the most common instances. Most policies don’t cover fines or punitive damages. They are there to protect the innocent, not the bloody minded.

So how do you know if you contributed? If you have such a policy with a Lloyds underwriter part of your premium may now be lining the pocket of one of America’s legal eagles. If you see a picture of them when this truly momentus case comes to court (Jacko’s lawyers became celebrities) consider that you might have funded their tie or specs. Which isn’t so bad if they’ve got taste.

You can’t prevent your premium being used to defend people that appear to be crooked yet you can ask your insurance company for a summary of claims they have settled. If you think they’re settling claims that you won’t be making perhaps you can choose an alternative which is more appropriate.

Top Tip: You can defend yourself against your own innocent mistakes and even wrongful acts of your peers. Make sure you don’t turn a blind eye and assume that insurance will protect you. Insurance protects income and reputation if arranged properly. It will not prove useful if things have been ignored or buried.

See our top tips section for simple ways to help yourself today.

Discover how your business network can help your clients

Jason Cobine, Insurance Expert — Wed, 06 Jan 2010 08:30:33 +0000

Your network can help you keep clients as well as find new ones

Here’s a simple way to add value to your product or service.

From time to time your clients will reach the limit of your product or service. With a good sales and marketing process you will have already set the parameters of where those lines are drawn. However, you can add value if you have worked out who can help your clients where you can’t. Read on for examples.

Many of my insurance clients require health and safety planning to ensure their insurance company pays out when they want it to and defends them when they don’t. Building relationships with the right companies ensures you can recommend the right person for each situation. Knowing who to refer helps clients save time. They don’t have to search.

Another example is temporary premises when clients need them. Building relationships here ensures there are plenty of providers I can trust to relocate my clients quickly and easily when the need arises. This solves their problem and increases your value.

Furthermore, in the networking business we are often asked for advice regarding online networking, which networking group to join or how to sell at a profit once the connections are made. Knowing people that provide these specific services means we can refer each other when our specialism is required.

How can you do this for yourself? Work out where your service begins and ends and find people who provide services that lead to and from you. You can do that by asking your clients who it was that told them about you and then ask what’s next on their do to list. You can do this before, during or after they have become your client.

When you contact possible strategic partners in your network ensure you tell them the benefit to them of working with you. Helping your clients and their clients by adding value is the simplest way to put it.

Visit http://beyondnetworking.co.uk/ for further information about business networking results.

See our top tips section for simple ways to help yourself today.

Health & Safety Inspections – coming soon?

Jason Cobine, Insurance Expert — Tue, 15 Sep 2009 09:00:18 +0000

On the spot fines following these inspections have been increased to £20,000. Find out if your business is at risk and review our 7 free top tips on Health & Safety.

There are three reasons why you may hear from the health & safety “police”. All of them are beyond your control.

Someone disgruntled with an axe to grind
Incident or Accident
Spot check

The first is very rare and relates to employees or ex-employees, competitors, neighbours or just about anyone else that isn’t a fan. Perhaps your partner if you’re a workaholic.

Number 2 speaks for itself yet it would have to be something serious. You may be responsible for reporting it to the authorities yourself because of regulations such as Riddor protocols (click here for a simple guide to RIDDOR from the health & safety executive). Or the emergency services or healthcare professionals may report to the local authorities.

Spot checks are unlikely yet I was introduced to a company last year that had been inspected on a spot check and given 7 days to attend to the inspectors concerns about asbestos. They would have been closed down if they did not. It was their bank manager that asked me to help. He had his client’s best interests at heart and asked me to find someone to handle this ASAP. The next day my contact visited the client and solved his problem.

Apart from these three reasons there is also the law, the recently increased fines, the hassle of tribunals or courts and evidence that businesses with robust health and safety plans make more profit.

See our top tips section for simple ways to help yourself today.

Customer Service – Where did it all go wrong?

Jason Cobine, Insurance Expert — Tue, 01 Sep 2009 09:15:49 +0000

I recently read an article in a newsletter from marketing expert Dave Croydon, Hilltop Consultancy. David was voicing his concern that automated telephone systems were of little benefit to customers, going as far as to call them a “customer disservice”.

The article mentioned that we wouldn’t accept it from the emergency services yet we’re already having to. My Mum broke her ankle last year and called me. Being made of stronger stuff than some of the celebrity icons of today, Mum didn’t want to bother the Ambulance service until she was sure it was broken. It was and I dialled the famous three digits, something we all dread.

How annoying to be put on hold by an automated system that informed me I was in a queue, at 9am on a Thursday morning. I was very, very annoyed yet I didn’t want Mum to be any more concerned than she already was. Realising a broken ankle meant less amenity than usual was a kick in the teeth for a 67 year old, I gritted my teeth and bit my tongue.

Thankfully, after my call as answered by a human the paramedic turned up on a bicycle within 3 minutes. This shows what can be achieved with technology when it’s entirely focused on results for the customer.

Whilst at the hospital, pain killers, X-rays and a cast were in order, and this gave me time to think on the situation. Apart from the value of living close to my Mum, I concluded that these automated systems can only be successful when you have a captive market – like the NHS. Whatever service you choose, if you don’t like the system you find another option. Here’s a link to a petition to get these numbers out of the NHS.

Did anyone ever say that they wanted to be charged not to speak to the person that could answer their query? It’s even more expensive if using a mobile. At this stage I should tell you about “say no to 0870“, a website that gives you the real number yet will not get you past the systems. I dislike calling these numbers and will select suppliers accordingly. My bank will be the first after a series of unanswered calls which I see as withdrawals from my personal time bank.

So what can you do to improve the service you offer? First things first, ask your customers what they would prefer. If they ask for an automated system, go for it. If not, enthuse those that work for you or record a new voicemail or message that gives callers the option to leave a message detailing when they want to hear from you as well as the nature of their call with their name and number. Or if you want to impress and have £35 per week in your marketing budget arrange for the phone to be answered by a human being by investing in an answering service. They will answer the call, ask when the call should be returned and send you the details by email or text. Calling back at a random time doesn’t make you efficient so call back when it’s good for them – it will save both of you time.

For me, these services are not there to give the impression you have a swanky office yet they are a great way of greeting your customers when you can’t. They simply advise the caller that you’re busy and will call back at a time convenient to them, as long as it’s reasonable, or give them the opportunity to reach you direct on another number, perhaps your mobile.

It’s my belief that automated systems are not good for the customer as they don’t provide a service. The only time they are useful is when the offer at the end of the line is worth the wait. Orderly Q operates a system that gives the caller reliable information on how quickly the call will be answered and the opportunity to leave a message requesting a call back – at a pre-determined time. The only time the other systems are acceptable is if they provide information or are able to signpost unimportant services out of hours.

Top Tip: At all other times it’s best to have the human touch and provide the personal service that you want to.

Insurers tighten their belts on business claims

Jason Cobine, Insurance Expert — Wed, 19 Aug 2009 09:15:19 +0000

Jason Cobine of insurance brokers Cobine Carmelson explains why insurance companies decline business interruption claims and offers tips on how accountants can secure the proper payment for their clients.

It’s not exactly news that insurance companies inspect paperwork relating to large claims with a fine tooth comb. In the current climate they may also be lowering their sights and taking a closer look at smaller businesses claims. Will your clients’ cash flow be affected if they suffer a claim? How can you help your clients check they have the cover they require? Read on for a handy hint that could potentially save your clients thousands of pounds.

Insurers are looking to cut their losses, and one way they are doing this is by hiring forensic accountants to ensure that claims are settled according to the policy wording. If clients have not sufficiently checked this wording before they claim, or if they haven’t purchased the right kind of cover, this can lead to declined claims or significantly reduced payouts, which in turn will affect the businesses’ ability to operate.

Getting the right cover
These claims occur when businesses suffer an incident that affects their ability to trade. Examples include a fire at an office in Dean Street, Soho, when the whole street was evacuated and access was denied for days; the closure of restaurants in Kensington due to demonstrations outside the Israeli embassy, and more memorably, the fire at Buncefield which burned for days, causing major disruption and even resulted in the M1 being shut.

Claims are rarely paid in full if the sum insured on the policy has not been correctly calculated. This is an easy mistake to make because insurance policy definitions are not always clear.

The most common mistake businesses make when assessing their requirements for insurance cover is deducting the cost of labour from their gross profit figures, according to Richard Cameron-Williams, a forensic accountant at RGL Forensics. This can lead to insurance claims for loss of profit being reduced or declined, which can have an effect on cash flow.

Mistakes are usually made when the sum insured is not based on the policy definition; so why do so many companies fall foul of these definitions? In my experience, most claims that go unpaid are declined because of a poor exchange of information rather than the insurers employing bullying tactics. There are exceptions of course, and some claims that should be paid are not. This can result in expensive litigation if the business has the resources to take action, but not many do*.

Another reason could be that people expect to be charged inflated premiums for more cover, and so don’t purchase sufficient cover for their needs. If a typical premium for gross profit cover of £100,000 is £200, not buying what is required may prove to be a false economy.

The insurance industry has not done enough to explain exactly what these terms mean and that must change.

Help clients to help themselves
As an insurance broker, I’m making it my mission to get claims paid. We can all learn from those who have seen the same innocent errors made time and time again and watched as legitimate claimants have been caught out by ‘small print’.

As an accountant, you can help businesses avoid this common mistake by asking them to provide you with the definition of gross profit or loss of revenue from their insurance policy. Compare the figure you extract from their books with the one they have on their insurance policy (and don’t deduct labour costs).

When it comes to advice, there is no one more trusted than an accountant and you can give clients advice on this subject via a newsletter before they experience a loss. Alternatively, why not incorporate this information into a seminar you invite them to, where they can learn to work this out for themselves? Once they get it right, the businesses will be properly protected and able to thrive despite adversity.

I’ll put my neck on the line and say insurance companies can be negotiated with so they don’t charge for any increase in cover until the next renewal. That’s a job for the broker and they’ll be happy to oblige, even though they might not make any cash until renewal. Like you, they probably want to keep clients happy and help grow their business.

Telephone: 020 7371 2812
Email: jason@cobinecarmelson.com
www.cobinecarmelson.com

*Roger Franklin at Edwin Coe Solicitors has evidence of reduced business interruption claims that were eventually resolved after much legal wrangling and the inevitable legal bills. Click here to download his article on this.

What is cyber insurance?

Jason Cobine, Insurance Expert — Thu, 13 Aug 2009 22:49:57 +0000

Twitter has experienced problems this week. Could it happen to you? What happens when your website is hacked or your e-commerce platforms compromised? Does your theft or loss of income insurance kick in?

The answer is that all three are unlikely yet there is something you can do to . Modern risks can be covered by contemporary insurance policies. Ever heard of cyber liability? It is an emerging form of cover designed to protect businesses in the virtual World.

The cover is designed to fill gaps in traditional policies where, typically, a claim is paid if physical damage of some sort occurs. Episodes such as hacking, viruses and hijacking of websites, attacks to steal credit card and other private information or attempted diversion of funds can be included. You can find cover for legal costs following harassment or libel too.

Once you apply for cover the underwriter will help you review your security systems and processes giving you an overview of your systems and its weaknesses. Gaps will need to be plugged within predetermined periods in order for cover to apply.

Top Tip: If you rely on your website for orders or payments you should check your security. Both income and reputation can be seriously affected if damage occurs.